Bank branch networks in sub-Saharan Africa grew by over 6% in 2011, according to research by Paris-based strategy firm DEVLHON Consulting. They are growing faster than South America, where growth was 3.8% that year, yet slower than Asia, where it was 9.7%.
But sub-Saharan banks still lack critical mass compared with banks in other emerging markets, the research found. They underperform in terms of return on equity and have a limited presence outside the African continent.
African banks also have a higher cost-to-income ratio (generally above 50%) than those of other emerging markets, particularly in Asia. Moreover, the stock market valuation of the major South African and Nigerian banks is still well below average emerging-market levels.
DEVLHON forecasts that the branch networks of leading banks in sub-Saharan Africa should grow between 46% and 95% between now and 2020, based on a sample of 19 African markets.
The consultancy warned that not all banks have the means to transform themselves into pan-African banking groups. Obstacles include achieving critical mass, the complexities of refinancing in growth markets and the difficulties in building effective operational, sales and technology platforms.
Yoann Lhonneur, a partner at DEVLHON Consulting, said: “The African banking sector’s potential is much like a long-distance race to gain access to savings and management of the customer relationships of tomorrow.”
Sally Percy is editor of The Treasurer